Linkages between financial sector CDS spreads and macroeconomic influence in a nonlinear setting

摘要

This paper investigates the asymmetric and nonlinear transmission of financial and energyprices to US five-year financial CDS sector index spreads for the banking, financial servicesand insurance sectors in the short- and long-run over the recent periods revolving around theglobal financial crisis. We employ the nonlinear ARDL (NARDL) model to account for theshort- and long-run asymmetries in the sensitivity of those CDS sector index spreads to theirdeterminants. Our findings suggest that there is evidence of short- and long-run nonlinearitiesand asymmetries in the adjustment process of the three CDS variables. There are also shortandlong-run asymmetries in the influences of macroeconomic and financial variables on theCDS sector spreads. These findings are important for policymakers who deal with credit risksat the sector levels.JEL Codes: C32, F65, G01